Does the use of financial derivatives affect earnings management decisions?

• 成果类型: Article
• 署名作者: Barton, J
• 署名单位: Emory University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2001.76.1.1
• 发表日期: 2001
• 页码: 1-26
• 关键词: market-based evaluation; RISK-MANAGEMENT; EMPIRICAL-EXAMINATION; discretionary; income; INVESTMENT; IMPACT

摘要

I present evidence consistent with managers using derivatives and discretionary accruals as partial substitutes for smoothing earnings. Using 1994-1996 data for a sample of Fortune 500 firms, I estimate a set of simultaneous equations that captures managers' incentives to maintain a desired level of earnings volatility through hedging and accrual management. These incentives include increasing managerial compensation and wealth, reducing corporate income taxes and debt financing costs, avoiding underinvestment and earnings surprises, and mitigating volatility caused by low diversification. After controlling for such incentives, I find a significant negative association between derivatives' notional amounts and proxies for the magnitude of discretionary accruals.